For the lead-in to this story, see my blogpost “Not Assessable,” 4/3/23*. Alon Farhy won that one, but IRS appealed. DC Cir found Section 6038(b) did give IRS authority to assess the nonreporting chops; Alon’s non-prosecution deal with DOJ, wherein he folded the taxes, didn’t preclude him from fighting the chops, which he did, and won.**

Now Judge Travis A. (“Tag”) Greaves has Raju J. Mukhi, 163 T. C. 8, filed 11/18/24. Raj was here back in April (see my blogpost “FBAR = FUBAR,” 4/8/24***), where Raj slid under the tag just like Alon. But IRS moved for Rule 161 reconsideration based on DC Cir’s repudiation of Farhy.

Raj was a MO resident at time of petition, hence is Golsenized to 8 Cir, which has said nothing about Farhy. Now when a non-Golsen-linked USCCA rules on a point, Tax Court will follow for uniformity’s sake, unless on serious review Tax Court thinks the USCCA got it wrong. And Tax Court thinks DC Cir got it wrong.

First, IRS wants Section 6201 to include every exaction in the IRC, not just taxes and the items in the illustrative list of extras in Section 6201(a). But Congress didn’t say that.

Next, the IRS did have power to assess everything in 1939, but the 1954 Code limited that. And we’re back with the language in Section 6671(a) and Section 6665(a), plus the other examples Judge Tag Greaves uses to show that when Congress wanted a penalty assessed and collected like a tax, Congress said so.

And the US of A is not without a remedy. 28 USC§2461 says whenever a method of collection is not provided for a penalty of whatever kind, DOJ can bring a civil action. And the need to do so does not render Section 6038(b) without force: there’s a penalty for every year the taxpayer doesn’t file. So IRS can’t lien or levy.

That this may be inconvenient for IRS is tough, but that’s life. Statutes mean what they say.

Ch J Kerrigan, and Judges Foley, Buch, Pugh, Ashford, Urda, Copeland, Jones, Toro, Marshall, Weiler, Way, Landy, Arbeit, and Guider agree.

Judge Nega dissents, but his dissent doesn’t get published today.

Edited to add, 11/19/24: I am informed by Public Affairs that Judge Nega has elected not to put his dissent in writing, but merely wants a “no” vote recorded. That’s his prerogative, of course, but I would have liked something like “‘Sometimes it’s more important that a matter be settled than that it be settled right,’ as Justice Brandeis said.” Or maybe, “DC Cir got it right, so let Raj appeal to 8 Cir. Why are we getting involved?” Makes better blogfodder, anyway, than a Stealth Dissent.

Judge Rose E. (“Cracklin'”) Jenkins joined too late to participate.

* https://taishofflaw.com/2023/04/03/not-assessable/

** https://caselaw.findlaw.com/court/us-dc-circuit/116134192.html

*** https://taishofflaw.com/2024/04/08/fbar-fubar/

I reprint, in its entirety, Ch J Kathleen (“TBS = The Big Shillelagh”) Kerrigan’s order in Riester Insurance, Inc., Docket No. 22752-22, filed 11/15/24, and ask my readers to help me understand this.

Does Judge Pugh have jurisdiction in this case?

“For cause, it is

“ORDERED that jurisdiction of this case is no longer retained by Judge Cary

Douglas Pugh. It is further

“ORDERED that this case is assigned to Judge Cary Douglas Pugh for trial or

other disposition.”

I must express my sympathy for STJ Zachary S. (“Hi-Rise”) Fried. Detailed for in camera of a monumental docu-dump in Amgen Inc. & Subsidiaries, et al., Docket No. 16017-21, filed 11/14/24, he does a phoneathon to get permission to do a random sampling, Order, at p. 1.

Breaking down the documents into “families,” he scans them for privilege, specifically client-attorney and FATP (Section 7525 federally-authorized tax practitioners, as defined by 30 USC §330; more about that later.). FATP communications are privileged like client-attorney communications.

Non-attorney candidates for admission to United States Tax Court should note carefully several of Judge Fried’s points. They might could just maybe so show up on the exam.

First, the difference between in-house counsel and external counsel; the presumption in favor of privilege for external counsel communications does not extend to in-housers. Apparently, given current hourly billing rates, nobody talks to nonsalaried lawyers unless they have to.

Second, the general waiver of privilege when petitioner will raise good-faith reliance on expert opinion as an affirmative defense to chops. Amgen avoids this in their pleadings. Whether this is a good tactic remains to be seen.

Third, specificity. Among whom or to whom and related to what was the communication directed or circulated? A PowerPoint presentation, which might have been viewed by anyone, is discoverable, as are items claimed to be privileged, to which no communication relates. Finally, e-mails sent to unidentified recipients: were these directed to persons seeking legal advice? Need-to-know is the guidepost.

Now about FATPs, as seen by Taishoff.

30 USC §330 speaks of “representatives of persons before the Department of the Treasury.” Y’all will recall how Dave Williams and Doug Shulman tried to stretch this to include return preparers, and came unglued in Loving. If you don’t recall, see my blogpost “Loving Conquers All,” 2/12/14.*

But non-attorneys who are admitted to US Tax Court  (USTCP = United States Tax Court Practitioner) represent persons before the Tax Court, a creation of Congress, and is separate from the Department of the Treasury. Tax Court loudly proclaims its independence from Treasury and all its works.

A USTCP, armed with Form 2848, can of course represent parties before Treasury.  But it’s the Form 2848 that gives him/her standing to do so, not admission to US Tax Court.

5 USC §500, to which 30 USC §330 is subject, doesn’t mention USTCPs, only representation before agencies.

So is a USTCP a FATP? If not, how are communications with such an one privileged?

* https://taishofflaw.com/2014/02/12/loving-conquers-all/

Herewith a couple miscellaneous items (hi, Judge Holmes) noted in passing, neither of themselves worthy of whole blogpost, but perhaps indicative of things to come.

Stephen C. Gilbert & Ronda D. Gilbert, Docket No. 18210-23, filed 11/13/24., are 177 (count ’em, 177) days late with the petition from the SND, according to Judge Elizabeth A. (“Tex”) Copeland. Steve & Ronda claim they never got the SND. USPS tracking information shows  both copies of the Notice of Deficiency were ‘Unclaimed/Being Returned to Sender.” “They further contend that the Appeals Officer assigned to their case, SL, left the Independent Office of Appeals at some time during the course of the appeals process, contributing to their lack of knowledge about the Notice of Deficiency.” Order, at p. 1.

IRS wants summary J, claiming mailing is sufficient, receipt not necessary, and IRS has plenty of somber reasoning and copious citation of precedent to back that up.

Except.

Steve & Ronda lived in NJ when they petitioned. Hence Culp country (3 Cir), where alone among the Circuits equitable tolling rules. See my blogpost “No Time for Modesty,” 2/15/22.* So now they get to tell Judge Tex Copeland why extraordinary circumstances thwarted their diligent attempts to assert their rights. Should be an interesting story.

Judge Albert G. (“Schoilar Al”) Lauber crafts a Rule 103 protective order for Mitsubishi Bank, a/k/a MUFG Bank Ltd., in Computer Sciences Corporation, Docket No. 4823-21, filed 11/13/24. Apparently some of MUFG’s proprietary info was hoovered up in the 1300 documents encompassing more than 10,500 pages by an IRS subpoena. Judge Scholar Al puts the veil thereon.

* https://taishofflaw.com/2022/02/15/no-time-for-modesty/

I will here engage in some editorializing and speculation, as opposed to my customary reportage, so you may skip this post, if you will.

No, this will not be political. I said I’m not going there, and I’m sticking to it.

Haven’t the multiple calamities that Loper-Bright was supposed to engender been exaggerated?

The abrogation of Chevron does not mean we can discard our copies of the CFR. Skidmore remains, and nothing in Loper-Bright requires any Federal judge to ignore or invalidate any Federal regulation we cite.

I just finished watching an hour-long webinar from my alma mater on the effect of Loper-Bright on laws affecting military veterans. The power of inertia is great; whoever may be Secretary of Veterans Affairs, their several Vicars of Bray remain at their posts. USDC judges, confronting the multiplicity of law and regulations affecting everything from cold-smoked whitefish to syndicated conservation easements, and being human (although some of us may doubt it), will take the course of least resistance. That means pay due obeisance to Loper-Bright and hold for the agency.

We seldom see cataclysmic change for what it is, and often exaggerate what isn’t. Me, too.

Baseball fans know that hitting for the cycle means a player, in a single game, hits a one-base hit (single), two-base hit (double), three-base hit (triple), and a four-base hit (home run). It is possibly the rarest feat in American professional baseball.

While Brian Dean Swanson, T. C. Memo. 2024-105, filed 11/12/24, has not received a Section 6673 frivolity chop in each increment from zero to $25,000, his record is sufficiently impressive to warrant a Taishoff “Frivolite of the Cycle” award.

“We take judicial notice that the Eleventh Circuit has sanctioned petitioner in the amount of $8,000 at least three separate times for taking such positions and that the Southern District of Georgia has also sanctioned him by permanently enjoining him from filing refund suits in federal court for any tax year in which he has failed to report his wages as income. See Swanson 9, 2023 WL 5605738, at *3; Swanson 6, 2021 WL 4551628, at *2; Swanson 3, 799 F. App’x at 671–72; Swanson 13, 2024 WL 3342503. We take further notice that this Court has sanctioned petitioner in the amount of $15,000 for making frivolous arguments. Transcript of Bench Opinion at 26, Swanson 11, No. 2526-23. As these sanctions appear to have left petitioner undeterred, we will grant respondent’s Motion and impose a penalty of the full $25,000 permitted in the hopes that petitioner will in fact think and conform his conduct to settled principles going forward.” T. C. Memo. 2024-105, at p. 7. (Footnotes omitted, but it’s more about Brian Dean’s appealing ways).

I can only wish Judge Alina I. (“AIM”) Marshall better success than I can myself envision.

But Brian Dean does manage to avoid the Section 6662(a) accuracy/negligence chops. The 1040 he filed isn’t a return, in that it doesn’t provide information reasonably necessary to calculate tax, nor is it a an honest and reasonable attempt to comply with law.

Oh, for the off-the-bencher hereinabove recited by Judge AIM Marshall, see my blogpost “Rounders’ Day, Again,” 4/22/24.*

• https://taishofflaw.com/2024/04/22/rounders-day-again/ recites aboive

Tax Court being closed, there will be no blogpost from me.

Whether Maimonides or Schumacher is your guide, neither addresses the problem that has been occupying far too much of the US Tax Court’s Chief Judges’ time. And mine.

I refer, of course, to the non-admitteds attempting to represent petitioners in Tax Court, because they are welcome at Exam. Having a Form 2848 or a CAF number is not enough. I will not weary my readers’ patience with yet another citation to an Order embodying the mantra “The United States Tax Court, which is separate and independent from the Internal Revenue Service, has certain requirements that must be met before an individual can be recognized as representing petitioner before the Court. The Tax Court, unlike the Internal Revenue Service, does not recognize power of attorneys.”

Almost every working day, at least a couple Orders (hi, Judge Holmes) with this language are needed to toss the non-admitted.  Leaving aside the ungrammatical “power of attorneys,” why this language does not appear in the Guide for Petitioners, Form 2 instructions, or anywhere else on the Tax Court website, eludes me.

Does the Chief Judge require busywork?

Judge Elizabeth A. (“Tex”) Copeland has to deal with unsalable, untransportable, irreparable, and unrecyclable WD-40 cans in IQ Holdings, Inc., T. C. Memo. 2024-104, filed 11/7/24. IQ set up a 501(c)(3) to research medical aerosols, and gave it land and building, a bunch equipment (hi, Judge Holmes), some inventory (aerosol cans and raw packaging materials), and cash. While waiting for TE/GE to bless said 501(c)(3), the cans went bad. USDOT told IQ they couldn’t ship them, WD-40 became immoveable and rejected the stuff, and IQ concluded it would cost more to recycle them than they were worth. So IQ wrote the stuff off. IRS wants to fight about the calculation of the amount of loss.

Reg. Section 1.471-2(c) provides guidance, based upon bona fide sales price. IQ never offered the stuff for sale, claiming no one would buy the junk. IRS wants summary J, but won’t get it from Judge Tex Copeland.

“We agree with IQH that Treasury Regulation § 1.471-2(c) cannot be read to require a taxpayer to offer for sale items that, in their current condition, would be tortious or illegal to sell. Moreover, solely for purposes of ruling on the Commissioner’s Motion for Summary Judgment, we construe the record in the light most favorable to IQH. Consequently, we must assume that both the IQ-branded aerosol products and the WD–40 cans were tortious or illegal to sell in [year at issue], precluding us from resolving the issue summarily on the basis that the goods were not actually held out for sale.” T. C. Memo. 2024-104, at p. 9. (Citation omitted).

And there’s also the issue in what year the junk became junk. IRS says IQ knew two (count ’em, two) years earlier the cans were junk. But IQ’s good faith is a fact question.

Summary J is fact-finding, not fact-determining, but there are two (count ’em, two) facts not in dispute. The Contemporaneous Written Acknowledgement from the 5012(c)(3) doesn’t have the magic “no goods or service were provided” wording, so that sinks the charitable side. Substantial compliance can’t o’ercrow explicit statutory requirement.

Likewise, IQ’s claimed NOL founders for year at issue because of failure to check the box on line 11 of the 1120 IQ filed (IQ is a C Corp), thereby failing irrevocably to renounce timely carrying back its NOL. That’s necessary to prevent free-riding by taxpayers, who could claim a “whoops” later on, depending on what income they subsequently had or didn’t have.

There’s argy-bargy about Section 1314 mitigation, but the year for which IQ should get a refund because its NOL needed to be carried back two years is not before the Court.

Finally, the Section 6662(a) chops might be avoided if IQ can put in its accountants and “various corporate representatives” (T. C. Memo. 2024-104, at p. 20) on the stand to testify to IQ’s good faith, so no summary J on that.

Once again, summary J affords discovery of everybody’s case, and what the judge thinks of them.

The Tax Court homepage announces today the death of the designer of its homeplace, Vic Lundy, at the age of 101. For more, see here.*

Surprisingly, The Architect’s Newspaper fails to mention The Glasshouse among Vic’s many notable creations. To remedy that oversight, see my blogpost “Vic Lundy,” 11/27/20.**

* https://www.archpaper.com/2024/11/victor-lundy-architect-artist-dies-101/

** https://taishofflaw.com/2020/11/27/vic-lundy/